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A WINNING streak by high rollers in Sydney has taken the shine off The Star Entertainment Group's (ASX:SGP) latest earnings which have slumped by 37 per cent.
The casino operator has delivered a $60.3 million net profit for the six months to the end of December, down from $97.1 million a year earlier, despite growth in spending from the domestic market.
The Star has revealed turnover from the VIP rebate business rose 1.5 per cent across its properties in Sydney, Brisbane and Gold Coast to $23.6 billion.
However, the win rate slumped to 0.88 per cent, or almost half the historic average of 1.43 per cent.
This contributed to a 2.6 per cent drop in group revenue to $1.1 billion for the period, with the VIP business reporting revenue of $207 million for the period, a fall of 32.9 per cent from a year earlier.
"In light of the fact we have now had three or four periods where the win rate has been below what our long term average has been, we have decided that for the full 2016 financial year, we will be normalising at 1.35 per cent," says CEO Matt Bekier.
Meanwhile, on a normalised basis net profit surged 26 per cent in the first-half to $142 million.
The Star, formerly known as Echo Entertainment Group, says trading in the early weeks of the second half of FY16 is unchanged from recent months.
The company expects capital spending of between $275 million and $325 million in FY16, in line with previous guidance.
Bekier noted disruption from capital works would have some impact on revenue and earnings from its Sydney and Gold Coast facilities.
The Star is investing $345 million in the refurbishment of Jupiters Casino on the Gold Coast and will inject a further $500 million into a revamp of its Sydney resort.
In a joint venture with Hong Kong investors Chow Tai Fook and Far East Consortium, both Sydney and Gold Coast properties have been earmarked for a new residential-hotel tower.
The Gold Coast facility is aiming for a new 200-metre tower offering 700 hotel rooms and apartments, with the plans also including a separate live sports theatre.
"Further expansion is a reflection of our fundamental belief that we need more hotel capacity in all of our properties, to compete successfully in the long run," says Bekier.
The partners also plan to develop a new 200-metre tower at The Star Sydney, featuring a Ritz Carlton hotel, which would amount to a total investment of about $1 billion in Sydney including the current five-year investment plan of $500 million.
In the first half of FY16, The Star Sydney increased earnings before interest, tax, depreciation and amortisation (EBITDA) by 21.7 per cent to $223 million, with domestic gross gaming revenue surging by 14.1 per cent compared with the previous year.
The Star's two Queensland properties - Jupiters Gold Coast and Treasury Brisbane - reported an 8.2 per cent lift in revenue to $370 million, with domestic gaming rising 4.2 per cent.
The board has declared a dividend of 5.5c per share, up 10 per cent on the previous first half dividend.
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